How the NFL protests led to Papa John Schnatter's downfall

Less than one year ago, John Schnatter’s company was the official pizza of the National Football League. Schnatter’s face graced, Papa John’s pizza boxes and delivery vans, and he constantly appeared in national TV ads with NFL stars like Peyton Manning and JJ Watt. Meanwhile, Major League Baseball had a long-running “Papa Slam” promotion that rewarded fans with a big pizza discount whenever a player hit a grand slam.

There was arguably no food brand more closely associated with American pro sports.

Schnatter waded into the NFL anthem controversy

The string of corporate missteps began in November 2017, when Papa John’s reported its 2017 Q3 earnings. The report reflected flat same-store sales growth, which was below analyst expectations. On the earnings call, Schnatter, CEO at the time, blamed Papa John’s flat sales on the NFL player protests.

Schnatter mentioned the NFL 44 times on his company’s earnings call,Bloomberg counted. He claimed “significant negative consumer sentiment of our association with the league” and declared: “The NFL has hurt us by not resolving the current debacle to the players’ and owners’ satisfaction… NFL leadership has hurt Papa John’s shareholders.”

Amid the backlash from consumers, it only took two days for neo-Nazi website The Daily Stormer to christen Papa John’s “the official pizza of the alt-right.” The website used a photo of a Papa John’s pizza with a swastika made of pepperoni. It was extremely damaging to Papa John’s brand. And pizza competitors piled on: When the CEO of Yum Brands, parent company of Pizza Hut, was asked on Yum’s earnings call about Schnatter’s comments, he said: “We’re not seeing any impact from any of that.” Frozen pizza maker DiGiorno mocked Papa John’s slogan in a viral tweet.

The next month, in December 2017, the heat was still loud, and Schnatter resigned as Papa John’s CEO. The company said he would remain as chairman.

By February, on its Q4 2017 earnings call (profit missed expectations, but revenue beat), Papa John’s divulged that it would no longer be the “official pizza of the NFL” after holding the sponsorship since 2010. It was the end of an era for the pizza brand. Pizza Hut immediately succeeded Papa John’s as the NFL sponsor, which also indicated that Yum Brands didn’t concur with Schnatter’s assessment that an association with the league was bad for business.

Following its exit from the NFL, Papa John’s news went quiet for a few months. Schnatter could have remained chairman of his company, and perhaps the company would have made innovations to engineer a turnaround, sans NFL sponsorship.

Schnatter said the n-word on a business call

But a July 11 Forbes story reported that on a May conference call, Schnatter used the n-word. The context was a training exercise, with a marketing agency called Laundry Service (owned by PR agency Wasserman), to train Schnatter to prevent PR gaffes. According to Forbes, Schnatter complained on the call that “Colonel Sanders called blacks n*****s” and was not publicly criticized for it. Schnatter issued an apology and did not deny the story.

But the dominos fell in a matter of hours on Wednesday as various organizations associated with Papa John’s, or Schnatter personally, cut ties.

First, Schnatter resigned from the University of Louisville board. Next, MLB announced it was ending the longtime “Papa Slam” promotion. Finally, late on Wednesday night, Papa John’s announced Schnatter would resign as chairman. (He is remaining a board member, and he has a 30% equity stake in the company.) In the aftermath, many wonder: Will Papa John’s change its brand name?

Schnatter’s downfall also provides a case study in corporate crisis response. It is reminiscent of a CEO scandal involving a much lesser-known, sports-adjacent company in 2014: Des Hague, the CEO of stadium caterer Centerplate, was caught on camera kicking a small dog in an elevator. When the backlash ensued on social media, Centerplate tried almost every possible response before finally ousting him as CEO. First, on Aug. 25, 2014, the company issued a statement that called the situation “a personal matter involving Des Hague” and distancing the company from his actions. The next day, on Aug. 26, the company announced that Hague would undergo anger management counseling. It did not quell the backlash. The third statement, on Aug. 27, said Hague had been put on probation and would donate $100,000 of his own money to an animal charity. That still wasn’t enough. On Sept. 2, Hague resigned.